Speaking at the University of Colorado Denver, the president recalled his struggles with student loan debt, saying that he and his wife, Michelle, together owed more than $120,000 in law school debt that took nearly a decade to pay off.
He said that sometimes he'd have to make monthly payments to multiple lenders, and the debt meant they were not only paying for their own degrees but saving for their daughters' college funds simultaneously.
"I've been in your shoes. We did not come from a wealthy family," the president said to cheers.
President Obama said his plan will help not just individuals, but the nation, because graduates will have more money to spend on things like buying homes.
"Our economy needs it right now and your future could use a boost right now," Obama said.
That resonates with many Southern California students.
Donald Brown is in his third year at California State University at Los Angeles and owes $12,000 for his student loans.
"It's stressful just being in school already, but then known that you have to take money out as well is kind of hard," he said.
The president will reduce the maximum required payment from fifteen percent of discretionary income to ten percent. It would go into effect next year. And instead of twenty five years the debt would be forgiven in twenty years.
The president's plan will accelerate a measure passed by Congress that reduces the maximum required payment on student loans from 15 percent of discretionary income annually to 10 percent. He will put it into effect in 2012, instead of 2014.
In addition, the White House says the remaining debt would be forgiven after 20 years, instead of 25. About 1.6 million borrowers could be affected.
President Obama will also allow borrowers who have a loan from the Federal Family Education Loan Program and a direct loan from the government to consolidate them into one.
The consolidated loan would carry an interest rate of up to a half percentage point less than before. This could affect 5.8 million borrowers.
Student loans are the second largest source of household debt.
The Associated Press contributed to this report.